TY  - JOUR
AU  - Bernanke,Ben
AU  - Gertler,Mark
AU  - Gilchrist,Simon
TI  - The Financial Accelerator and the Flight to Quality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4789
PY  - 1994
Y2  - July 1994
UR  - http://www.nber.org/papers/w4789
L1  - http://www.nber.org/papers/w4789.pdf
N1  - Author contact info:
Ben S. Bernanke
E-Mail: Rita.C.Proctor@frb.gov

Mark Gertler
Department of Economics
New York University
269 Mercer Street, 7th Floor
New York, NY 10003
Tel: 212/998-8931
Fax: 212/995-4186
E-Mail: mark.gertler@nyu.edu

Simon Gilchrist
Department of Economics
Boston University
270 Bay State Road
Boston, MA  02215
Tel: 617/353-6824
Fax: NA
E-Mail: sgilchri@bu.edu
AB  - Adverse shocks to the economy may be amplified by worsening credit-market conditions-- the financial 'accelerator'. Theoretically, we interpret the financial accelerator as resulting from endogenous changes over the business cycle in the agency costs of lending.  An implication of the theory is that, at the onset of a recession, borrowers facing high agency costs should receive a relatively lower share of credit extended (the flight to quality) and hence should account for a proportionally greater part of the decline in economic activity.  We review the evidence for these predictions and present new evidence drawn from a panel of large and small manufacturing firms.
ER  -